FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2011

FAIR VALUE MEASUREMENTS

NOTE 19—FAIR VALUE MEASUREMENTS

The following table presents the Company’s assets and liabilities measured at estimated fair value on a recurring basis based on the fair value hierarchy:

(Dollars in thousands)	Quoted Prices in Active Markets (Level 1)		Significant  Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
As of December 31, 2011:
Assets:
Investment securities, available for sale	$	4,991	$	—	$	—	$	4,991
Liabilities:
Contingent consideration	$	—	$	—	$	3,597	$	3,597
Common stock warrant liability		—		—		1,403		1,403
Total	$	—	$	—	$	5,000	$	5,000
As of December 31, 2010:
Assets:
Investment securities, available for sale	$	1,880	$	304	$	—	$	2,184
Liabilities:
Common stock warrant liability	$	—	$	—	$	5,700	$	5,700

The following table presents the reconciliation of assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2011 and 2010:

(Dollars in thousands)	Beginning Balance		Purchases		Issuances		Amounts Realized in Earnings			Transfers In/Out of Level 3		Settlements		Ending Balance
Year ended December 31, 2011:
Contingent consideration	$	—	$	—	$	3,478	$	(119	)	$	—	$	—	$	3,597
Common stock warrant liability		5,700		—		—		4,297			—		—		1,403
Total	$	5,700	$	—	$	3,478	$	4,178		$	—	$	—	$	5,000
Year ended December 31, 2010:
Common stock warrant liability	$	—	$	—	$	5,105	$	(595	)	$	—	$	—	$	5,700

From time to time, the Company is required to measure certain assets and liabilities at estimated fair value. These fair value measurements typically result from the application of specific accounting guidance under GAAP and are considered nonrecurring fair

value measurements under FASB ASC 820-10. The following table presents financial and nonfinancial assets and liabilities measured using nonrecurring fair value measurements at December 31, 2011 and 2010:

(Dollars in thousands)	Quoted Prices in Active Markets (Level 1)		Significant  Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Fair Value
As of December 31, 2011:
Assets:
Real estate owned, net (1)	$	—	$	—	$	2,377		$	2,377
Commercial real estate investments, net (1)		—		—		33			33
Loans held for sale, net		—		—		32,700			32,700
Total	$	—	$	—	$	35,110		$	35,110
As of December 31, 2010:
Assets:
Real estate owned, net (1)	$	—	$	—	$	2,571		$	2,571
Loans held for sale, net		—		—		38,938			38,938
Total	$	—	$	—	$	41,509		$	41,509
(1)    Amounts represent the Company’ REO and commercial real estate investments which resulted in gains (losses) on assets and liabilities recorded on a nonrecurring basis during the period. The following table summarizes the total gains (losses) on assets and liabilities recorded on a nonrecurring basis for the periods indicated:
					Year Ended December 31,
(Dollars in thousands)					2011			2010
Real estate owned, net					$	(882	)	$	(1,921	)
Loans held for sale, net						550			3,705
Commercial real estate investments						(512	)		—
Discontinued lease liability						—			(47	)
Total					$	(844	)	$	1,737

FASB ASC 825, Financial Instruments, requires disclosure of the estimated fair value of certain financial instruments and the methods and significant assumptions used to estimate such fair values. The following table presents the carrying values and fair value estimates of financial instruments as of December 31, 2011 and 2010:

	December 31, 2011				December 31, 2010
(Dollars in thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
ASSETS
Continuing Operations:
Cash and cash equivalents	$	52,439	$	52,439	$	70,424	$	70,424
Investment securities, available for sale		4,991		4,991		2,184		2,184
Loans receivable, net		3,750		3,750		1,967		1,967
Discontinued Operations:
Cash and cash equivalents		117		117		568		568
FHLB stock		2,051		2,051		2,051		2,051
Loans held for sale, net		32,700		32,700		38,938		38,938
Commercial real estate investments		231		231		5,484		5,484
Note receivable		1,861		1,861		1,639		1,639
LIABILITIES
Continuing Operations:
Lines of credit	$	5,116	$	5,116	$	—	$	—
Contingent consideration		3,597		3,597		—		—
Long-term debt		51,613		42,036		39,000		35,685
Common stock warrant liability		1,403		1,403		5,700		5,700

The Company used the following methods and assumptions to estimate the fair value of each class of financial instrument at December 31, 2011 and 2010:

Cash and cash equivalents

Cash and cash equivalents are recorded at historical cost. The carrying amount is a reasonable estimate of fair value as these instruments have short-term maturities and market interest rates.

Investment securities, available for sale

Fair values for investment securities, available for sale are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments with similar credit, maturity, and interest rate characteristics.

Loans receivable, net

Loans receivable, net, consists of commercial real estate loans, commercial lines of credit and purchased credit-impaired commercial term loans. The fair value of commercial real estate loans and commercial lines of credit considers estimated credit losses and variable interest rates, which approximate market interest rates. The fair value of purchased credit-impaired commercial term loans is based on a discounted cash flow analysis utilizing assumptions, including the amount and timing of expected cash flows.

FHLB stock

Federal Home Loan Bank (“FHLB”) stock is recorded at cost. Ownership of these securities is restricted to member banks and although Signature is not a member bank, FIL was previously a member of the FHLB of San Francisco. Purchases and sales of these securities may only be executed with the issuer and at par value. The fair value of investments in FHLB stock is equal to the carrying amount.

Loans held for sale, net

The fair value of loans held for sale, net is based on several factors, including current bids and market indications for similar assets, recent sales, discounted cash flow analyses, estimated values of underlying collateral and actual loss severity experience in portfolios backed by similar assets.

Commercial real estate investments

The fair value of commercial real estate investments is based on various factors including current bids and market indications of similar assets, recent sales and discounted cash flow analyses.

Note receivable

The note receivable is a short-term note received in connection with the sale of commercial real estate investments. The fair value of the note receivable considers the short-term nature of the instrument, as well as the estimated credit worthiness of the counterparty.

Lines of credit

The carrying value of lines of credit is a reasonable estimate of fair value as these instruments have short-term maturities and market interest rates.

Contingent consideration

The fair value of contingent consideration is based on the Company’s expectation of future operating results and includes assumptions related to discount rates, and probabilities of various projected operating result scenarios.

Long-term debt

Long-term debt includes the Notes Payable, the Term Loan and the Seller Notes. The fair value of the Notes Payable is based on quoted market prices. The Term Loan and Seller Notes have market terms and the carrying amount is a reasonable estimate of fair value.

Common stock warrant liability

The fair value of the common stock warrant liability is based on a lattice option pricing model that utilizes various assumptions, including expected term, volatility, risk-free interest rate, share issuance frequency and exercise price.